The paper introduces a model of bid/ask price formation in an imperfectly centralized forex dealership market in continuous time. The dealers have costly access to best quotes. They interpret signals from the joint dealer-customer order flow and decide upon their own quotes and trades in the...

In this paper we study the hypothesis of “divergent expectations” with a signaling game. Such hypothesis points out that, in emerging economies, local investors tend to be front-runners in a currency crisis. Our analysis shows that changes in the informational structure available to the...

The paper proposes a continuous time model of an FX market organized as a multiple dealership. The model reflects a number of salient features of the Czech koruna spot market. The dealers have costly access to the best available quotes. They interpret signals from the joint dealer-customer order...

After years of effective functioning, the intermediate exchange rate systems ended up becoming prone to suffering speculative attacks, as the process of financial integration advanced. The empirical evidence collected in this paper endorses the fact that the less strict pegged exchange rate...

A pesar de que han sido numerosos los episodios en los que algunas economías han experimentado simultáneamente colapsos en el mercado cambiario y suspensión de sus compromisos financieros externos, las aportaciones de la literatura financiera son recientes y exiguas. En el presente documento...

This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all...

This paper examines the production, export and risk management decisions of a risk-averse competitive firm under exchange rate risk. The firm is export flexible in allocating its output to either the domestic market or a foreign market after observing the exchange rate. Export flexibility is...

Despite major recent advance in the literature on financial crises, the key role of central banks in the dynamics of financial crises are still not well understood. Our aim is to contribute to a better understanding of the dynamics of financial crises by explicitly modeling the strategic options...

We propose a speculative attack model in which agents receive multiple public signals. It is characterised by its focus on an informational structure which sets free from the strict separation between public information and private information. Diverse pieces of public information can be taken...

Financial markets and macroeconomic environments are often characterized by positive externalities. In these environments, transparency may reduce expected welfare from an ex-ante point of view: public announcements serve as a focal point for higher-order beliefs and affect agents' behaviour...